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University Vice-Chancellor Stuart McCutcheon said the increase would bring in an extra $3.5 million but would still leave the university with a deficit of $11.8 million which would have to be met partly by cutting staff numbers.

"We anticipate an increase in costs of 3.7 per cent, or $18.6 million," he said.

"The Government has increased the Student Achievement Component funding by only 1 per cent, or $3.3 million, and the domestic student fee increase will bring in $3.5 million, so that still leaves us $11.8 million short."

Part of the gap will be made up by raising fees for international students by 4.1 per cent, but the rest would have to come from cutting staff numbers.

He said the university could not let academic staff/student ratios worsen because that would affect teaching quality and university rankings, which are crucial to attracting international students.

"That only leaves professional staff such as administrative services and student support services," he said.

He said the tight budget could also force cuts in academic staff in fields where student numbers are declining, such as arts and education, although there could be staff increases in expanding courses such as engineering.

Universities NZ director Chris Whelan said all other universities that have announced fee increases so far, including AUT, Massey, Victoria and Otago, have also decided to raise fees by the maximum 2 per cent.

"Universities are bound by the fee maximum criteria set by the ministry every year, which is usually set at a level around the consumers price index [CPI], but a typical university's costs rise by about one and a half times the CPI," he said.

"About half the costs are driven by people and people costs have generally gone up above the CPI over the last 10 years.

"International IT costs, library subscription costs, construction costs, have all gone up ahead of the CPI."

Auckland University Students Association president Will Matthews said he was the only member of the university council to vote against the increase.

His education vice-president Jessica Palairet said "persistent underfunding by the Government" had forced universities to raise fees and reduce staff numbers.

"Increases in fees harm New Zealand's most vulnerable students the most," she said.

"Higher fees will also disincentivise many from attending university at all, with the prospect of tens of thousands of dollars of debt scaring many away from higher education."

AUT University also lists $6000 as its cheapest fee next year. Slightly cheaper fees will still be available at Massey University ($5840 for arts and business courses) and at Otago ($5793 for arts).